Why Is the Inclusion of a Limitation of Liability Clause

question 57

Multiple Choice

Why is the inclusion of a limitation of liability clause in a commercial contract considered to be an effective solution for business legal risk management?

• A) It triggers avoidance of liability in standard form commercial contracts.
• B) It creates equity because it imposes the same terms on every customer.
• C) It limits financial responsibility for damages if there is a breach of contract.
• D) It transfers risk from the business owners to the business and its customers.

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Definitions:

Market Index

A market index is a hypothetical portfolio of investment holdings which represents a segment of the financial market.

R-squares

A statistical measure in finance that represents the proportion of the variance for a dependent variable that's explained by an independent variable or variables in a regression model.

Portfolio Performance

The assessment of how an investment portfolio has done in terms of returns for the risk taken, often compared against benchmarks or goals.

Treynor-Black Model

A special case of the Markowitz model of efficient diversification, derived by assuming returns are generated by the index model.